Modeling the performance of US direct investment in Japan: Some empirical estimates

Foreign firms' direct investments in Japan increased from about $930 million in 1984 to $2.2 billion in 1987, and are still increasing at a rapid rate. Most of these investments come from the United States and Europe. In this paper a short-run model for the performance of a foreign parent firm's subsidiary in Japan is presented. The model is based on theories presented by Hymer, Caves, Buckley and Casson, among others, and consists of two equations: one for profitability and the other for growth. Duality is used to relate a parent firm's activities to its subsidiary firm's profitability. The model is estimated using data for US firms' subsidiaries in the Japanese chemical industry. We find that for jointly owned subsidiaries (joint ventures), imports from US parent firms and the R&D spending by both US and Japanese parent firms are major determinants of profitability and growth. US firms' fully owned subsidiaries, however, exhibit considerably different profit and growth behavior than their jointly owned counterparts. Because of the small sample sizes used, it is not possible to ascertain the sources of the observed differences.     

Foreign Investment, Technology Transfer, and the Technology Gap: A Note

The paper analyzes a simple differential game model of international technology transfer via foreign direct investment, in which a subsidiary of a multinational corporation and a host-country firm are engaged in a technology accumulation race. In contrast to previous works, it is shown that an elasticity of the foreign firm's marginal quasi-rent plays a key role in determining the effects of technology spillover and of efficiency of learning activities on the technology transfer: those are positive if it is larger than unity in absolute value, and vice versa. Other comparative static results are reported.     

Patient Admission Patterns and Acquisitions of "Feeder" Hospitals

Acquiring outlying community hospitals is one approach commonly used by large tertiary care hospitals to increase referrals. Sophisticated acquirers may also seek to selectively increase referrals of more profitable patients. To explore these issues, we study vertical hospital acquisitions. Using a treatment and control framework, we find that roughly 30% of vertical acquisitions lead to a significant increase in referrals. Very few result in decreases. We find that increases are concentrated among patients undergoing more profitable procedures and with more generous insurance. However, we find no evidence that hospitals shun patients with higher expected costs of care.     

Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

This paper analyzes a model wherein firms' owners hire biased managers in a differentiated goods duopoly with network effects. We show that whether firms hire an aggressive manager or not depends on both the degree of product differentiation and the strength of network effects in price competition whereas it does not depend on the degree of product differentiation or the strength of network effects in quantity competition. Thus, the attitudes of firms' managers depend on the type of competition and the relative magnitude of the strength of network effects to the degree of product differentiation. Copyright © 2015 John Wiley & Sons, Ltd.     

Price Versus Quantity in a Duopoly with a Unilateral Effect and with Bargaining over Managerial Contracts

This study examines the endogenous choice of each firm’s strategic contract, that is, a price contract or a quantity contract, in a duopoly in which their demand functions are asymmetric when the content of their managerial contracts is determined through bargaining between the owner and the manager. The degree of asymmetry between their demand functions corresponds to the relation between the goods they produce. In contrast to the case wherein each firm’s delegation parameter is determined through profit maximization, we show that the quantity competition cannot become the equilibrium market structure when the bargaining power of the manager relative to that of the owner is sufficiently low. In particular, when the relation between the two goods is complementary, two asymmetric market structures can be observed in equilibrium. Furthermore, we consider the situation in which the relative bargaining power of the manager to that of the owner within each firm is different between the two firms.     

Can Small Class Policy Close the Gap? An Empirical Analysis of Class Size Effects in Japan

Can smaller classes lead to better educational outcomes and greater equality in achievement? We estimate the causal effects of class size on achievement tests by using discontinuous changes in class size under the Japanese public compulsory education system. We employ a value‐added model that uses achievement tests conducted at two different times during the same school year. Our results show that a reduction in class size has significantly positive effects on Japanese language test scores in the sixth grade, especially at schools in wealthy areas. However, we find no evidence that a universal small class policy closes the achievement gap among schools.     

Impossibility of Nash implementation in two-person economies

In this note, we prove two impossibility results of Nash implementation in two-person economies. First, we will show the non-existence of continuous and balanced mechanisms which implement the Walrasian correspondence. Second, by adding a convexity assumption of mechanisms, we present the impossibility of continuous implementation of Pareto optimal and individually rational allocations in balanced way. Received: 16 April 1996 / Accepted: 25 April 1997     

Book Reviews

This paper reformulates Kalecki's investment models based on 'the principle of increasing risk'. First, it is shown that in his model risk can be interpreted as a conditional probability of bankruptcy of a firm, or the 'hazard rate' in reliability theory. Secondly, a simple static Kaleckian investment model is developed based on this interpretation. In the model, a slightly modified Kaleckian optimality condition for investment holds. It is also shown that, as Kalecki correctly pointed out, the principle of falling marginal efficiency of capital (or investment) is not required to obtain a finite level of investment. Finally, I consider sequential investment in an intertemporal model. In this model, a modified version of the Kaleckian optimality condition determines investment. In addition, as Kalecki emphasized, his increasing risk limits the level of investment even without increasing and convex adjustment costs associated with investment, by which the finite rate of investment is derived in the macroeconomics literature.     

Estimating switching costs involved in changing mobile phone carriers in Japan: Evaluation of lock-in factors related to Japan’s SIM card locks

This paper employs a web-based conjoint-type questionnaire to examine empirically user preference for a hypothetical Subscriber Identity Module (SIM) unlock situation in Japan’s mobile phone market. This paper also analyzes carriers’ other marketing strategies to lock in consumers. The empirical analysis in this study reveals the following: over 80% of survey respondents evaluate a highly compatible platform with the SIM unlocked. Approximately 70% of consumers find that the value of discounts on initial payments exceeds the discounts on one-year monthly payments. In addition, conditions set by continuing agreements for mobile carriers and mobile handsets reduce consumer benefit by 35% at the median in the case of SIM unlocking with compatible platforms.